For Immediate Release
Chicago, IL – December 24, 2012 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include IntercontinentalExchange Inc. (ICE), NYSE Euronext Inc. (NYX), Morgan Stanley (MS), CME Group Inc. (CME) and NASDAQ OMX Group Inc. (NDAQ).
Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=5513
Here are highlights from Friday’s Analyst Blog:
ICE Quotes #8.2B for NYSE Buyout
IntercontinentalExchange Inc. (ICE) announced its intention to buy the largest stock exchange based on listings – NYSE Euronext Inc. (NYX) for $8.2 billion. The deal is expected to culminate by the first half of 2012, subject to the fulfillment of regulatory compliances in the U.S. and Europe.
Accordingly, the $8.2 billion deal is based on $33.12 per NYSE share, which represents a 37.7% premium on NYSE’s closing price on Dec. 19. Meanwhile, IntercontinentalExchange plans to fund the transaction by letting out 67% in shares and 33% in cash, which will be raised through cash and credit facilities.
Moreover, the investors at NYSE have the option of taking cash payment of $33.12 a share or receive 0.2581 shares of IntercontinentalExchange for each NYSE share. A third option includes a mix of $11.27 in cash along with 0.1703 IntercontinentalExchange shares per NYSE share, although this funding is restricted to a maximum cash outlay of $2.7 billion and a maximum stock outlay of 42.5 million shares of IntercontinentalExchange.
Post acquisition, the 220-year old NYSE will own 36% in the 12-year old IntercontinentalExchange, while four members of the former will share the latter’s board. Meanwhile, IntercontinentalExchange is seeking the advice of Morgan Stanley (MS) along with BMO Capital Markets Corp, Broadhaven Capital Partners, Lazard Group LLC, Societe Generale Corporate & Investment Banking, and others
Why the Merger Makes Sense
NYSE has had a history that elucidates its journey boom to bang. NYSE has been the largest exchange vis-à-vis value of listing within the U.S., France and Netherlands. However, the growth of the company was put under stress with heightened competition, regulatory challenges and the ongoing market volatility amid the low interest rate environment over the few years. These factors have significantly hit the company’s trading volumes and margins, shrinking its global market share from 82% to 21% currently. A merger at this point could help NYSE leverage its efficiencies and global presence productively, thereby positioning it well to tap growth opportunities once the global economy recoups stability.
Gaining edge through the merger
The NYSE-IntercontinentalExchange merger is expected to be a solid business combination. The alignment of derivative operations and clearing services acts as a strategic fit for both the companies. Alongside, the merger is expected to generate more than 15% of earnings accretion within the first year of completion of the deal. Going ahead, management projects run-rate expenses synergies of about $450 million, which will be reaped in the second year of the merger startup. NYSE itself has generated $82 million in cost savings so far in 2012 from its expense management plan that should produce cost synergies worth $250 million, 33% of which is projected to be earned by the end of 2014.
Additionally, the merger will bring forth a strong competitive advantage by creating an end-to-end multi-asset portfolio and diversifying across the globe, while also vigorously tapping new opportunities in the emerging economies. Further, NYSE Liffe’s both trading and clearing operations will be merged into ICE Clear Europe. This will create an excellent clearing model that is expected to grow by leaps once the interest rate volatility dissipates and interest rate swap clearing develops. The operational and capital efficiencies attained in both the U.S. and Europe will make the merged entity a dominant global player and well-position it to take away the market share from leading derivative giant, CME Group Inc. (CME).
Hence, the merger is backed by a strong operating and competitive leverage, which will help the merged parties to generate enhanced operating cash flow, trading volumes and expense control. These factors will further aid IntercontinentalExchange to initiate annual dividends of about $300 million, which is impressive given the current volatility, thereby amplifying the shareholders’ value.
Watchful on Second Attempt
However, this is not the first time that NYSE is up for a merger. In February this year, NYSE was compelled to terminate its $10 billion merger with Frankfurt-based Deutsche Boerse due to the rejection from the regulators based on anti-trust concerns that were anticipated to create unhealthy competition. For similar regulatory, political and commercial hurdles, the take-over bid of $11.3 billion, initiated together by IntercontinentalExchange and NASDAQ OMX Group Inc. (NDAQ), got scrapped last year. At that time, IntercontinentalExchange was expected to take over NYSE’s European futures markets (Liffe, Liffe U.S.) and the over-the-counter clearing business (:NYPC).
Hence, we remain on the edge to see further regulatory and other developments regarding the merger, as a slight plausibility of the merger being scrapped based on the anti-trust and regulatory concerns remains apparent.
IntercontinentalExchange carries a Zacks #3 Rank, which implies a Hold rating in the short term, while the long-term recommendation remains Neutral. However, NYSE holds a Zacks #4 Rank, which translates into a short-term Sell rating, which the long-term recommendation remains Underperform.
Want more from Zacks Equity Research? Subscribe to the free Profit from the Pros newsletter: http://at.zacks.com/?id=5515.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=5517
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leon Zacks. As a PhD from MIT Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5518.
Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Follow us on Twitter: http://twitter.com/zacksresearch
Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.
Zacks Investment Research
800-767-3771 ext. 9339
More From Zacks.com
- Investment & Company Information
- NYSE Euronext